BANK OF AMERICA: Bitcoin is the 'most crowded' trade

Count
large fund managers among those unable to resist the allure of
bitcoin's massive
returns.

Owning the scorching-hot cryptocurrency - which has surged more
than 350% this year - is seen as the most crowded trade to a pool
of 214 fund managers overseeing $629 billion, according to a
survey conducted by Bank of America Merrill Lynch.

Ad

To be specific, 26% of investors surveyed in September said they
viewed being long bitcoin as the most crowded position. Coming in
second place and being dethroned from the top spot was the long
Nasdaq trade, with
22% of responders mentioning it, BAML's data showed.

caption

Long bitcoin is the most crowded trade right now, according to a monthly BAML fund manager survey.

Further, Nobel-winning author Robert Shiller, who predicted
the two biggest speculative markets in recent history, recently
doubled down on his
view that bitcoin is a bubble in an interview with Quartz.
BAML's survey shows large fund managers have yet to heed his
warning - a choice made at their own potential peril.

Rounding out the top three most crowded trades in BAML's
study is the short US dollar trade. The greenback has slid almost
10% in 2017, and hedge funds in particular have been keen to
position for further weakness, according to recent Commodity
Futures and Trading Commission data.

The prevalence of shorting the dollar marks a major shift
for fund managers, for whom going long the currency was the
number one investment as recently as April, capping off a
five-month streak as the most packed trade.

The following chart shows the evolution of the BAML
survey's most crowded investment, with bitcoin taking the reins
in September:

caption

Bitcoin is the most crowded trade for fund managers, while the long dollar trade has fallen out of favor.